...Current Issues in Accounting The case of Phar-Mor Inc is new to me after coming across a number of scandals and I am excited to do research on it. Phar-Mor Inc is a deep discount drug store that was established in 1982. The business model was to by huge masses of products or alternatively called “power buying” and selling them at a huge discount of 25 to 40% of retail price (Lansing, 2011). In 2002, the corporation had 310 outlets with 25,000 employees in majority of the states, 34 to be precise. The problem was first discovered through misleading information concerning reporting inventories. Another problem was through the CEO Monus, who owned at least 60% of the 10 teams of the Worlds Basket Ball Leagues. It is a problem because the CEO was estimated to have embezzled $15 million in the corporation’s assets to support the teams. There are a number of other fraudulent factors involved that have increased the amount of fraud to 500 million! If SOX was enacted in 1992, then it would have helped in the following manner: Section 203, Audit Partner Rotation: “The new rules impose more rigorous standards of independence for the external auditors of SEC reporting companies (including foreign private issuers) than under existing SEC rules that existed” at the time of the Phar-Mor Inc scandal( Lansing, 2011 ). This also required more frequent partner rotation off an audit engagement team. If Coopers and Lybrand were not auditing Phar-Mor Inc on a continuous basis, meaning for...
Words: 709 - Pages: 3
...accounting fraud and auditor legal liability c a S eS inc lu de d in t hiS Se ction 4 89 99 4.1 Enron Corporation and Andersen, LLP Analyzing the Fall of Two Giants . . . . . . . . . . . 4.2 Comptronix Corporation 4.3 Cendant Corporation . . . . . . . . . . . . . . . . . . . . . . Identifying Inherent Risk and Control Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . 111 119 127 137 Assessing the Control Environment and Evaluating Risk of Financial Statement Fraud . . . . . . . . . . . . . . . . . . . . . . 4.4 Waste Management, Inc. 4.5 Xerox Corporation 4.6 Phar-Mor, Inc. Manipulating Accounting Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . Evaluating Risk of Financial Statement Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounting Fraud, Litigation, and Auditor Liability instructor resource Manual — do not coPy or redistribute instructor resource Manual — do not coPy or redistribute enron corporation and andersen, llP analyzing the fall of two giants inS tr uc t ional o b je c t ive S [1] c a s e 4.1 Mark S. Beasley · Frank A. Buckless · Steven M. Glover · Douglas F. Prawitt [2] [3] To help students understand what happened at Enron Corporation and how Andersen’s involvement with Enron led to the accounting firm’s downfall. To enhance students’ appreciation of the importance of understanding an audit client’s core business strategies. To develop students’...
Words: 33542 - Pages: 135
...behavior. Do you think “maintaining a culture that emphasizes ethics and compliance” is enough to prevent fraud? Do we need to focus on the dangers of unbridled greed and on inventing fancy investment instruments that few people understand but many people trade since no one wants to be left behind in the often believed unlimited profit potential of the markets? Title II of SOX consists of nine sections that establish standards for external auditor independence. The goal of Title II of SOX is to restrict auditing companies from providing non-audit services (e.g., consulting services) for the same clients in which they audit. In the article “The Case of Phar-Mor Inc.” the author Williams, S. Lansing (2011) presents a case study in hindsight to determine if the 1992 bankruptcy of the deep discount drugstore Phar-Moc Inc who cost its investors 500 million dollars might have been prevented if the Sarbanes-Oxley Act of 2002 (SOX) had been in effect. Do you think that Title II, Section 203, “Audit Partner Rotation” and Title II, Section 206, “Conflicts of Interest” of SOX would have...
Words: 317 - Pages: 2
...Fordham University Graduate School of Business ACGB 7171 Auditing of Accounting Systems I—Fall 2013 Course Objectives: The objective of this course is to introduce students to the auditor’s decision-making process in both an audit of financial statements and an audit of internal controls over financial reporting. The class consists of lecture, individual case studies and in class exercises. Students are given an introduction to the following topics: • Generally Accepted Auditing Standards (GAAS) • The AICPA Code of Professional Conduct and its related rules and interpretations • An auditors’ legal responsibilities • Auditors professional judgment • The evaluation and testing of internal controls • The effect of IT on the audit process • The development of an audit program • PCAOB standards • The auditor's reports Book: Auditing and Assurance Services by Arens, Elder and Beasley 14ed Publisher Pearson/PrenHall ISBN 978013257595 |2013 |Topic |Assignment/Chapter to read | |Thursday September 5th |Introduction to the CPA Profession and the Auditing |Chapters 1 and 2 | | |Environment | | | | ...
Words: 473 - Pages: 2
...Auditing Cases An Interactive Learning Approach FIFTH M F S D E D ITIO N S. B A. B M. G F. P Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editor in Chief: Donna Battista Acquisitions Editor: Stephanie Wall Editorial Project Manager: Christina Rumbaugh Senior Managing Editor: Cynthia Zonneveld Production Project Manager: Carol O'Rourke Senior Operations Supervisor: Diane Peirano Printer/Binder: BindRite Graphics, Robbinsville Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within text. Copyright © 2012, 2009, 2006, 2003, 2000 by Pearson Education, Inc., publishing Prentice Hall. All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458, or you may fax your request to 201-236-3290. Many of the designations by manufacturers and sellers to distinguish...
Words: 139985 - Pages: 560
...as well as the increased number of accounting restatements and SEC enforcement actions in recent years. (See 2003 Annual Review of Financial Reporting Matters by the Huron Consulting Group and the SEC’s Report Pursuant to Section 704 of the Sarbanes-Oxley Act of 2002.) In response to the fraud problem, Congress and regulatory authorities have enacted tougher laws and increased enforcement actions. Organizations are implementing tighter controls and broader oversight. The auditing profession has adopted more rigorous auditing standards and procedures, and software developers are adding continuous monitoring features to back-office systems. It remains unclear whether these efforts are sufficient to mitigate the fraud problem. Many studies suggest fraud is more likely to occur when someone has an incentive (pressure) to commit fraud, weak controls or oversight provide an opportunity for the person to commit fraud, and the person can rationalize the fraudulent behavior (attitude). This three-pronged framework, commonly known as the “fraud triangle,” has long been a useful tool for CPAs seeking to understand and manage fraud risks. The framework has been formally adopted by the auditing profession as part of SAS 99. A Different Way to Think About Fraud Risks The authors believe that the...
Words: 2534 - Pages: 11
...was to report robust .sales of electric blankets in the summer and barbecue grills in late autumn. Eventually, earnings woes and Dunlap's bluster prompted his ouster by an aroused board of directors in June 1998. That was followed shortly by the replacement of accounting firm Arthur Andersen and a series of investigations and shareholders lawsuits, most of which are still pending. Sunbeam joins an ignominious cluster of companies — Rite Aid, c u e International (now part of Cendant Corp.), Livent, Oxford Health Plans, Phar-Mor, Miniscribe and, most recently. MicroStrategies — in business's hall of shame. All of these companies have one depressing feature in common: top managers who, whether out of desperation or greed, apparently turned to accounting trickery to manufacture imaginary sales and other revenues and pump up earnings, sometimes over a period of years. Writing in The Wall Street Journal, one pundit recently reckoned that just three recent fraud cases — Sunbeam, CUC and Oxford — burned...
Words: 2578 - Pages: 11
...Ethical Obligations and Decision Making in Accounting Text and Cases Steven M. Mintz, DBA, CPA Professor of Accounting California Polytechnic State University, San Luis Obispo Roselyn E. Morris, PhD, CPA Chair and Professor of Accounting Texas State University-San Marcos Boston Burr Ridge, IL Dubuque, IA Madison, Wl New York San Francisco St. Louis Bangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto Table of Contents Chapter 1 Integrity: The Basis for Ethics in Accounting 1 What Is Ethics? 1 Definition 1 Application of Ethical Reasoning in Accounting DigitPrint Case 33 32 Conclusion 34 Discussion Questions 34 Endnotes 36 Chapter 2 Cases 37 2 Case 2-1: A Faulty Budget 38 Case 2-2: Better Boston Beans 39 Case 2-3: Eating Time 40 Case 2-4: Is Internal Whistle-Blowing "Right"? Case 2-5: Play Ball 43 Case 2-6: Supreme Designs, Inc. 44 Case 2- 7: The City of West Buckle 46 Case 2-8: The CPA Review Course 47 Case 2-9: The Ethics ofiPod-ing 48 Case 2-10: The Tax Return 49 Distinguishing between Ethics and Morality Religious and Philosophical Foundations of Ethics 3 Teleology 4 Deontology 6 41 Acting with Integrity Personal Integrity 8 7 The Moral Point of View 7 The Six Pillars of Character.... 8 Trustworthiness 8 Respect 10 Responsibility 10 Fairness 11 Caring 11 Citizenship 12 Chapter 3 Ethical Decision Making in Business 50 What Is Business Ethics...
Words: 1401 - Pages: 6
...Using Teams in Production and Operations Management: Forensic Accountants: Fraud Busters. By: For: Class: Bus 508: Contemporary Business Date: 13 November 2012 Abstract: A case study for the Strayer University, Woodbridge, VA, Business 508 class, this paper provides for a brief review of 1) The skills that a forensic accountant requires; 2) The role of the forensic accountant in the courtroom; 3) The legal responsibilities of the forensic accountant; and lastly, 4) The role of the forensic accountant in a couple of major accounting fraud scandals. The world of Accounting has seen several major scandals since the early 1990s. These include major accounting failures such as Enron, WorldCom, Adelphia, Tyco, Phar-Mor, Cendant, Computer Associates, AOL, Freddie Mac, ImClone, Qwest Communications, Royal Ahold, Health South Corporation, AIG, Lehman Brothers, and most recently the Olympus Corporation. Some of these have resulted in the collapse and dissolution of the company – Enron, Adelphia; others have resulted in a major restructuring of the company – AOL, AIG, Freddie Mac. Whatever the result, they have all been caused by accounting fraud – either “cooking the books” to hide major losses or to hide the theft of funds. It has also resulted in the failure and absorption of the one of the Big Five Accounting firms – Arthur Anderson. Besides the whistle blower who brought most of these to public view and the lawyers who have been involved their dismantling...
Words: 1726 - Pages: 7
...course is oriented around the ethical and moral issues faced by accounting and finance professionals. Students are expected to have taken AFM 211 before taking AFM 311. As well, AFM 431 (a precursor course to this one) as well as PHIL 215/ARBUS 202 are anti-requisites to this course. If a student has taken one of those courses and hasn’t already spoken to Professor Charters (or someone else in the SAF) about this he/she should speak to the professor as soon as possible so an appropriate determination of how to proceed can occur. More can be said about the course than the calendar description included above. This is the primary ethics course designed for students in the AFM, Math/CPA, and BioTech/CPA programs. The focus of the course is the study of ethical and moral issues that arise in professional lives of accountants and financial managers It is assumed that all of you have some familiarity with the financial scandals of...
Words: 5416 - Pages: 22
...Auditing Cases instructor resource Manual f our th e d itio n Mark S. Beasley Frank A. Buckless Steven M. Glover Douglas F. Prawitt do not coPy or redistribute Prentice hall Upper Saddle River, New Jersey ta b l e s e ct ion o f co n t e n t s 1 2 client acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . S o l u tionS inc lu de d in t h iS Section 1.1 Ocean Manufacturing, Inc. 3 The New Client Acceptance Decision s e ct ion Understanding the Client’s Business and assessing risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 S o l u tionS inc lu de d in t h iS Section 2.1 Your1040Return.com Evaluating eBusiness Revenue Recognition, Information Privacy, and Electronic Evidence Issues . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.2 2.3 2.4 Dell Computer Corporation Evaluation of Client Business Risk Flash Technologies, Inc. Asher Farms Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Risk Analysis and Resolution of Client Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Understanding of Client’s Business Environment s e ct ion 3 Professional and ethical issues . . . . . . . . . . . . . . . . . . . . . . . 59 S o l u tio nS inc lu de d in t h iS Section 3.1 3.2 3.3 3.4 3.5 A Day in the Life of Brent Dorsey Staff Auditor Professional Pressures Nathan Johnson’s Rental Car Reimbursement Solving Ethical Dilemmas–Should...
Words: 162000 - Pages: 648
...1. Introduction “The only constant is change”, as Heraclitus points out (Brainyquote.com). There is no doubt that the world has changed over time physically, economically, and culturally. As the world has evolved, so has business, and as business has evolved so has auditing. The concept of auditing is as old as civilization. The need for a knowledgeable, external, third person to verify transactions or accounts and detect fraud has been present since the advent of trade and accounting. Thus the goal of auditing, in this sense, has not changed since. Teck-Heang Lee observed that “auditing serves as a mechanism to monitor conduct and performance, and to secure and enforce accountability (Lee 2008). All in all, an audit function plays a crucial role in maintain welfare and stability in society.” However, what has changed is how the roles and responsibilities of auditors have changed to reflect the needs of the business environment of the time. As such, auditors and the auditing profession have always played a very important role in business and, more recently, in society in general. As business in today’s world becomes more dynamic, accounting (and therefore by extension auditing) must also evolve to become more dynamic. The evolution of auditing is a complicated history that has always been changing through historical events. This can be seen in the shift in the role of external auditors from a cyclical audit approach to now more of a top-down risk-based continuous audit. The...
Words: 5760 - Pages: 24
...fraud includes four essential elements: 1. A material false statement 2. Knowledge that the statement was false when it was spoken 3. Reliance on the false statement by the victim 4. Damages resulting from the victim’s reliance on the false statement In the broadest sense, fraud can encompass any crime for gain that uses deception as its principal technique. This deception is implemented through fraud schemes: specific methodologies used to commit and conceal the fraudulent act. There are three ways to relieve a victim of money illegally: force, trickery, or larceny. Those offenses that employ trickery are frauds. The legal definition of fraud is the same whether the offense is criminal or civil; the difference is that criminal cases must meet a higher burden of proof. For example, let’s assume an employee who worked in the warehouse of a computer manufacturer stole valuable computer chips when no one was looking and resold them to a competitor. This conduct is certainly illegal, but what law has the employee broken? Has he committed fraud? The answer, of course, is that it depends. Let us briefly review the legal ramifications of the theft. The legal term for stealing is larceny, which is defined as “felonious stealing, taking and carrying, leading, riding, or driving away with another’s personal property, with the intent to convert it or to deprive the owner thereof.” In order to prove that a person has committed larceny, we would need to prove the following four...
Words: 5045 - Pages: 21
...Accounting ethics is primarily a field of applied ethics and is part ofbusiness ethics and human ethics, the study of moral values and judgments as they apply to accountancy. It is an example of professional ethics. Accounting introduced by Luca Pacioli, and later expanded by government groups, professional organizations, and independent companies. Ethics are taught in accounting courses at higher education institutions as well as by companies training accountants and auditors. Due to the diverse range of accounting services and recent corporate collapses, attention has been drawn to ethical standards accepted within the accounting profession.[2] These collapses have resulted in a widespread disregard for the reputation of the accounting profession.[3] To combat the criticism and prevent fraudulent accounting, various accounting organizations and governments have developed regulations and remedies for improved ethics among the accounting profession. ------------------------------------------------- Importance of ethics The nature of the work carried out by accountants and auditors requires a high level of ethics. Shareholders, potential shareholders, and other users of the financial statements rely heavily on the yearly financial statements of a company as they can use this information to make an informed decision about investment.[4] They rely on the opinion of the accountants who prepared the statements, as well as the auditors that verified it, to present a true and fair...
Words: 5921 - Pages: 24
...The term “fraud” refers to an intentional act by one or more individuals among management, those charged with governance, employees or third parties, involving the use of deception to obtain an unjust or illegal advantage. Although fraud is a broad legal concept, the auditor is concerned with fraudulent acts that cause a material misstatement in the financial statements. Misstatement of the financial statements may not be the objective of some frauds. Auditors do not make legal determinations of whether fraud has actually occurred. Fraud involving one or more members of management or those charged with governance is referred to as “management fraud”; fraud involving only employees of the entity is referred to as “employee fraud”. In either case, there may be collusion with third parties outside the entity. * Two types of intentional misstatements are relevant to the auditor’s consideration of fraud misstatements resulting from fraudulent financial...
Words: 6695 - Pages: 27
